Property management companies take care of the day-to-day work of running a condo community. The services they provide can vary widely: from collecting rents and maintaining the property to handling accounting and dealing with emergency responses. The sheer range of services they offer means you might end up working with a company that charges fees for services you don’t need or want — and even, in some cases, services they might not be licensed to provide.
In this post, we consider the typical property management fees condo boards should expect to pay. We also consider a court case that demonstrates how property management companies sometimes charge extra fees for managing insurance claims and reconstruction. These fees can violate condo by-laws, and even state law. This highlights how important it is for condo boards to review property management contracts carefully.
What Percentage Do Most Property Management Companies Charge?
Property management companies typically charge between 7% and 10% of the common fees paid by condo owners. The exact percentage varies depending on the company, the location of the condo community, and the services offered. Some companies also charge additional fees for additional services; for example, the company might charge an additional fee for dealing with insurance claims in case of a covered event. In our experience, these extra insurance fees have risen significantly; instead of charging only for extra hourly costs, some companies charge as much as 10 percent.
What Is Included in the Management Fee of a Property?
Management fees usually cover the cost of managing tenants (current and future) as well as routine maintenance and repairs of the property, including individual units. For example, a property manager might manage the process of filling a vacant unit, including advertising the space, communicating with potential tenants, and running credit checks, while also collecting rent from current tenants and taking care of any routine maintenance needs around the property.
Occasionally, a property management company also manages the insurance claims process in the event of a natural disaster. As we see below, they might also charge high fees for doing so, and these fees might not be covered by insurance, pointing to how important it is for a condo board to be aware of the contract between the board and the management company.
Property Management Fees: A Case Study
A Virginia condo association, Gunston Corner, hired a company called Capitol Property Management. The property management contract provided the property manager with a 10% fee for processing insurance claims in the event of a disaster, and another 5% for acting as the association’s construction manager in the event of rebuilding.
Unfortunately, there was a fire in the complex; the management company filed a claim with the association’s insurance company which included construction costs and the additional 15% total fee for managing the claims and rebuilding process.
The insurer paid the construction costs. However, they refused to pay the property manager’s extra fees associated with the claim and the construction oversight, and the case went to trial. In Capitol Property Management Corporation v. Nationwide Property & Casualty Insurance Company,¹ a federal trial court held that a condominium association’s property insurance did not in fact cover the manager’s fees for processing insurance claims and managing construction following a fire.
After a loss occurs, property managers usually have overtime and extra work duties directly resulting from the physical damage and increased work necessary to repair that damage. It’s not uncommon for property managers to account for this extra work with overtime charges. Ultimately, while the property manager argued that the claims fees were similar to extra expenses such as overtime, and that the oversight of the construction was a construction expense related to supervision, the court held that neither fee was a direct result of physical damage.
We learn two things from this case study. One, if the bill to the association and the case had been presented with overtime charges rather than a percentage, the result may have been different. (An extra 15% fee seems ridiculously high and may have influenced the court’s verdict.) And two, boards should be careful to look at all the costs which property managers place into their contracts. The percentage payment of an insurance recovery to the property manager — even if agreed to in advance — may not be allowed in the by-laws.
How Much Do Property Managers Charge in Florida?
Property management fees for condo associations in Florida typically range from 10% to 15% of the total annual common charge. Several factors can make this fee higher or lower, including the size of the association, the amenities available on the property, location, and any additional services provided by the company.
As we saw above, it’s important to make sure that the board is aware of all fees being charged by the property management company. They should also ensure that those fees comply with board by-laws.
Further Resources on Insurance Coverage Law
Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.
- Filing A Property Insurance Claim
- Insurance Company Response Time
- What To Do When You Have a Denied/Underpaid Claim
- Wildfire Claims
- Flood Claims Handbook
- More Information on Hurricane Deductible and Policy Limits
Why Merlin?
Are you fighting an insurance company that won’t pay up on claims? With nearly 40 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we’re your trusted advocate.
